Author Topic: Clueless and no idea where to start  (Read 3358 times)

lschrader

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Clueless and no idea where to start
« on: July 14, 2016, 11:21:25 AM »
Hi everyone,

I am a new MMM reader (about 2 weeks) and am feeling clueless. I tried to work on a case study but I have too many unsure expenses (we are transitioning from a small apartment into a house) at this point so I will give some basics. I'm 25 and husband is almost 29, both work, no kids. We are closing on our first house next month $95k loan @2.875% interest. Only other debt is $12K @2% on one car. We currently have nothing (I now realize how awful this is) saved for retirement and I feel so overwhelmed with no idea where to start. I have the option of a 403 b at my current job. In January my employer will start contributing 11% of my annual salary ($36k). My husband can do a 401K and I think his company will match the first 2%. At this point I think we can put about $1000-$1500 per month into retirement. Any suggestions on where to start or what would be best to do with this money would be greatly appreciated! Thank you!

HipGnosis

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Re: Clueless and no idea where to start
« Reply #1 on: July 14, 2016, 11:28:51 AM »
You're ahead of the game that you're even thinking of it at your age!!   CONGRATS!!
And, as a new homeowner, your first priority is what most call an 'emergency fund'.  I call it my 'life happens' account.
Life is so (so!) much easier (and less expensive) when you have an account to deal with... life.  It simply doesn't happen how you plan. And that goes almost double for home ownership.
Congrats on the house.  I wish you much success and joy in making it your home.

ender

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Re: Clueless and no idea where to start
« Reply #2 on: July 14, 2016, 11:33:30 AM »
Even if you have unsure expenses it's still helpful to try to write down what you have had.

It can be helpful (but completely overwhelming!) to look through your past month or two of expenses. A lot of them you might go "$100? no idea what this was for!" or feel bad about them, but just getting a feel for what you were spending helps. A ton of spending will be the same whether you are in a house or apartment.

What does your husband make? Does he make similar or more to you?

Your situation doesn't look too bad overall but without more information it's harder to know.

ooeei

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Re: Clueless and no idea where to start
« Reply #3 on: July 14, 2016, 11:36:13 AM »
For a good primer on investing:

http://jlcollinsnh.com/stock-series/

It's a lot to read, but do what you can and it will get you in the right frame of mind for investing. 

Zamboni

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Re: Clueless and no idea where to start
« Reply #4 on: July 14, 2016, 11:39:09 AM »
Welcome to the forum!

The first step is really careful tracking of spending for at least 3-6 months. I just do it in excel, recording down every single expense on sheets I've created for each month, but others do it using fancier software or apps, like YNAB. There are some spreadsheets stickied at the top of one of the forums here (Called "One sheet to rule them all" or something like that.) It takes awhile to get into the habit of recording expenses, but it is well worth it.

I agree with HipGnosis that a emergency fund of a few thousand should be built up as a priority. However, I also think you should sign up for your employers 403b/401k plans as soon as possible. If you are not used to having much money, then I say pick a pretty high target for your contributions (10-15%? more?) Make sure that you can adequately cover your expenses with what is left over. If you can't, then you can always reduce the amount going towards retirement next month. I did this with my first job, and older me now is very thankful to younger me!

A great book for just starting out with saving and investing is called Millionaire Teacher by Andrew Hallam. It's easy to read, probably because it's written by a teacher, and your local library might have a copy for you. ARebelSpy recommended it to me, so I am passing on the recommendation. Good luck!

lschrader

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Re: Clueless and no idea where to start
« Reply #5 on: July 14, 2016, 11:51:41 AM »
My husband's gross salary is about 43K. I did go back through our spending to try and get an idea and I realized we were spending an outrageous amount on food (over $1000 for two people) because we were eating out entirely too much. Since then, I have taken to bringing peanut butter sandwiches to work and hubs is also bringing lunch. I am hoping cutting down our food bill will significantly help. Here are some rough numbers that I have

Gross $6583

Health/vision/dental insurance $125
Rent $475--mortgage will be $651
We give 10% of our gross income to charity/church so roughly $658 (this one is nonnegotiable for us)
Real Estate Taxes $200
Phone $83
Internet $50
Hulu/Netflix $20
Gas/oil $200
Car insurance $141
Car payment $292

Anticipated/unsure bills
$160 Electric
$50 Water/sewage
$20 trash
$100 homeowner insurance

Food goal $400
 

ender

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Re: Clueless and no idea where to start
« Reply #6 on: July 14, 2016, 12:11:23 PM »
Initial thoughts which you might already know - your homeowners insurance seems really high, we're at $625/year for a place about $230k or so in value (you are almost double us in cost).

Your cars are really expensive ($633/month plus repairs?). Ditto your car insurance costs, $1700 a year is... over 4x what my wife and I pay. Granted, we have no collision/comprehensive but have you shopped insurance rates? When we bought our home we found that rates were dramatically different between companies.

Two categories I don't see are "misc" stuff (whether household supplies or gardening supplies or whatever) and entertainment. My wife and I separate eating out from our food budget which I think is helpful in seeing our spending overall.

The first step of keeping track of everything is really useful! It's overwhelming and a lot of guesswork. Budgeting is kind of like that for a while too, it took my wife and I a while to get everything "dialed in" so we knew what was going on once we got married and we were both pretty good about it prior to being married.

Kapiira

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Re: Clueless and no idea where to start
« Reply #7 on: July 14, 2016, 12:30:02 PM »
This is an interesting mmm article about setting up a line of credit on your house rather than having money sitting in your bank account as an emergency fund.  Since you are in the process of closing on a house this might be a good option to investigate.

http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

lschrader

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Re: Clueless and no idea where to start
« Reply #8 on: July 15, 2016, 07:40:56 AM »
Initial thoughts which you might already know - your homeowners insurance seems really high, we're at $625/year for a place about $230k or so in value (you are almost double us in cost).

Your cars are really expensive ($633/month plus repairs?). Ditto your car insurance costs, $1700 a year is... over 4x what my wife and I pay. Granted, we have no collision/comprehensive but have you shopped insurance rates? When we bought our home we found that rates were dramatically different between companies.

Two categories I don't see are "misc" stuff (whether household supplies or gardening supplies or whatever) and entertainment. My wife and I separate eating out from our food budget which I think is helpful in seeing our spending overall.

The first step of keeping track of everything is really useful! It's overwhelming and a lot of guesswork. Budgeting is kind of like that for a while too, it took my wife and I a while to get everything "dialed in" so we knew what was going on once we got married and we were both pretty good about it prior to being married.

This may be a stupid question but what is the best way to shop for insurance? Just make calls and get quotes? When my husband and I first got married I asked my parents what to do and they just recommended calling the company they have always used (State Farm)....I do feel like we pay a higher premium than we should. We are both safe drivers. I used to coupon quite a bit so we have a decent stock pile of what I normally label "misc" items but I will try to think of an average number. I actually did start a spreadsheet (starting with July because it was easiest) to see how we are truly spending our money so we can hopefully find areas to cut back.

Does anyone have any recommendations for where to keep an emergency fund? Is the best place just my local bank so the money is easily accessible?

 

ender

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Re: Clueless and no idea where to start
« Reply #9 on: July 15, 2016, 08:43:42 AM »
Initial thoughts which you might already know - your homeowners insurance seems really high, we're at $625/year for a place about $230k or so in value (you are almost double us in cost).

Your cars are really expensive ($633/month plus repairs?). Ditto your car insurance costs, $1700 a year is... over 4x what my wife and I pay. Granted, we have no collision/comprehensive but have you shopped insurance rates? When we bought our home we found that rates were dramatically different between companies.

Two categories I don't see are "misc" stuff (whether household supplies or gardening supplies or whatever) and entertainment. My wife and I separate eating out from our food budget which I think is helpful in seeing our spending overall.

The first step of keeping track of everything is really useful! It's overwhelming and a lot of guesswork. Budgeting is kind of like that for a while too, it took my wife and I a while to get everything "dialed in" so we knew what was going on once we got married and we were both pretty good about it prior to being married.

This may be a stupid question but what is the best way to shop for insurance? Just make calls and get quotes? When my husband and I first got married I asked my parents what to do and they just recommended calling the company they have always used (State Farm)....I do feel like we pay a higher premium than we should. We are both safe drivers. I used to coupon quite a bit so we have a decent stock pile of what I normally label "misc" items but I will try to think of an average number. I actually did start a spreadsheet (starting with July because it was easiest) to see how we are truly spending our money so we can hopefully find areas to cut back.

Does anyone have any recommendations for where to keep an emergency fund? Is the best place just my local bank so the money is easily accessible?

A few different ways, you could find an insurance broker person - they normally will shop around for you. This is probably the easiest way.

My wife and I picked a handful of the "bigger" insurance companies and did quotes with them ourselves. Most let you do online quotes, so we did Progressive, Geico, Allstate, Amica, and USAA and kept track in a spreadsheet. Auto especially is really easy to do an online quote as with homeowners there are a lot more factors.

lschrader

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Re: Clueless and no idea where to start
« Reply #10 on: July 19, 2016, 10:03:04 AM »
Initial thoughts which you might already know - your homeowners insurance seems really high, we're at $625/year for a place about $230k or so in value (you are almost double us in cost).

Your cars are really expensive ($633/month plus repairs?). Ditto your car insurance costs, $1700 a year is... over 4x what my wife and I pay. Granted, we have no collision/comprehensive but have you shopped insurance rates? When we bought our home we found that rates were dramatically different between companies.

Two categories I don't see are "misc" stuff (whether household supplies or gardening supplies or whatever) and entertainment. My wife and I separate eating out from our food budget which I think is helpful in seeing our spending overall.

The first step of keeping track of everything is really useful! It's overwhelming and a lot of guesswork. Budgeting is kind of like that for a while too, it took my wife and I a while to get everything "dialed in" so we knew what was going on once we got married and we were both pretty good about it prior to being married.

This may be a stupid question but what is the best way to shop for insurance? Just make calls and get quotes? When my husband and I first got married I asked my parents what to do and they just recommended calling the company they have always used (State Farm)....I do feel like we pay a higher premium than we should. We are both safe drivers. I used to coupon quite a bit so we have a decent stock pile of what I normally label "misc" items but I will try to think of an average number. I actually did start a spreadsheet (starting with July because it was easiest) to see how we are truly spending our money so we can hopefully find areas to cut back.

Does anyone have any recommendations for where to keep an emergency fund? Is the best place just my local bank so the money is easily accessible?

A few different ways, you could find an insurance broker person - they normally will shop around for you. This is probably the easiest way.

My wife and I picked a handful of the "bigger" insurance companies and did quotes with them ourselves. Most let you do online quotes, so we did Progressive, Geico, Allstate, Amica, and USAA and kept track in a spreadsheet. Auto especially is really easy to do an online quote as with homeowners there are a lot more factors.

Thank you so much Ender! I changed our insurance company and we're saving over $1000 per year on auto.

kitkat

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Re: Clueless and no idea where to start
« Reply #11 on: July 19, 2016, 01:23:11 PM »

Does anyone have any recommendations for where to keep an emergency fund? Is the best place just my local bank so the money is easily accessible?


Yes just your normal bank (Capital One, Wells Fargo, local credit union) is fine to start. Once you have a few thousand saved there, and are getting full match from your retirement plans, I would set up a Roth IRA with Vanguard or similar. You can contribute $5500 annually (from your take-home/post-tax pay), invest it in a Fund, and all of the withdrawals and earnings will be tax-free when you take them out. If you are able to max this out as well, then you open a brokerage account and invest there (plenty of mentions in MMM posts about low-fee index funds and Vanguard).

Note: I have a traditional pension so am unfamiliar with 403 b and 401 k specifics, and I am also not married, so you'll have to check the rules on IRA options (Roth vs. Traditional) and your work investment plan to make sure everything I said applies to you.

http://www.rothira.com/roth-ira-rules